Paytm announced that it will be arraigning a 2 percent deposit fee from credit card users going forward. According to Paytm, this was being done to contest misuse of its zero-fee transfers, amplification that savvy users were revolving their cash through the wallet to make essentially “free” money in the form of reward points. Paytm alleged that to ensure that genuine users don’t lose money, it will reappearance the 2 percent charge in the form of coupons that can be charitable on Paytm.
Later, its initiator Vijay Shekhar Sharma explained that the coupons can also be used on third-party sites to pay Swiggy or Uber, although this tool has not been actuated yet.
As eminent in the post announcing this decision, since November, Paytm has been allowing users to yield cash out of the wallet in their bank accounts at no charge. Typically, cashing out has concerned a fee from wallets. At the same time, Paytm and other wallets haven’t charged fees for depositing cash into their systems. This meant that credit card handlers could fill up their Paytm wallets using the card, then allocate that money back to their bank accounts, at no charge. “They were not only getting free loyalty points which effectively has been free cash, but also getting access to free credit,” Paytm noted.
This would be subsidised by Paytm’s own costs, as the company pointed out.
Incidentally, Paytm pays fees to card networks or banks whenever you use any payment instrument like any other online commerce company. Paytm pays a hefty charge when you use your credit card to card networks and issuing banks. If user simply adds money and takes to the bank, we lose money. Our revenue model requires users to spend money within our network and we make money from the margins available to us on various products/services we offer.
For this reason, Paytm is now charging a 2 percent deposit fee from credit card users, and refunding them the same in the form of a coupon that can be used on the Paytm app. As we mentioned, on Twitter, Sharma has clarified that the coupons can work on third-party sites as well, and added that you will be able to use these with apps such as Swiggy, Uber, although the FAQ on the page currently still states that it can only be used on the Paytm app.
There are a couple of other caveats listed on the FAQ page. For one, these refund coupons will only be given when the amount you’re filling up is more than Rs. 250. If your transaction is lower than that, you will not get a coupon. Also, you will get a fresh coupon every time you top-up Paytm using a credit card, these coupons can not be clubbed, and have to be applied manually and individually. Also, these coupons can only be used in a single transaction. Also, the coupon isn’t applied as a discount on the transaction – it gives you an instant cashback to your Paytm wallet.
The coupons can also be used for bill payments, recharges, and so on, these are not limited to shopping on Paytm Mall. The voucher s will finish on 2017, but the FAQ mentions that this can be extended on request.
These charges are only being useful on credit card users, so if you’re using a debit card, UPI/ IMPS payments or net banking, then you are not affected by this move.